South Africa. Six retirement ‘rules of thumb’ that should be retired
Managers of retirement funds have to manage the underlying assets in retirement funds according to rules in Regulation 28 of the Pension Funds Act. These rules set certain maximum exposure to certain asset types such as equities, bonds, cash, hedge funds, private equity investments and offshore funds.
Managers may invest a maximum of 75% of the portfolio in equities, and a maximum of 25% offshore, (excluding Africa) for example. The maximum exposure to hedge funds is 10% and to private equity is 10%.
There are very few rules of investing for retirement investing that everyone actually agrees with. They include the following:
You should start investing as early as possible and carry on investing throughout your working life.
You should be mindful of the costs of investing when investing for the long term.
Don’t cash in your pension savings when you are between jobs.
Be aware that the real target is to outperform inflation. A reasonable target for a retirement portfolio is inflation plus 5%,
However, at least six previously widely held assumptions and ‘rules for investing’ have had to be retired for a number of reasons, ranging from increasing longevity to a lower investment return environment.
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